The first hearing will be held tomorrow on a Republican plan to phase out taxes on most industrial equipment in Michigan.

Local governments collect about $400 million in revenue a year from the industrial property tax.

Lieutenant Governor Brian Calley helped design the plan to get rid of the tax over the next several years. He says Michigan is unique in how it taxes industrial property -- and he says it’s driving investments to other states and countries.

“So at the end of the day, it’s about jobs and removing the penalty for investing in Michigan,” Calley said.

But local leaders say the way the phase-out is drafted now, it would force disinvestment in schools, and city services. That’s because it does not replace all the revenue lost to local governments.

Some state lawmakers like Senate Democratic leader Gretchen Whitmer agree.

“At best, they only intend to replace 81 percent of the dollars,”Whitmer said. “So does that mean that they are going to cut our fire services 19 percent? They’re also going to cut our police service 19 percent? They’re going to cut our schools an additional 19 percent? How is that made up?”

The communities that would be most affected are industrial cities with the most factories. That includes Michigan's third-largest city, Warren.

Warren mayor Jim Fouts says the city stands to lose $12 million a year in revenue if the tax is repealed.

“It would be absolute disaster," said Fouts, who said he'd be forced to cut public safety and other vital services.

"It’s a good example of short-term thinking without looking at the long-term consequences, which are draconian consequences.”

Fouts says Lansing has recently shifted more costs and mandates to local governments, while also cutting off their sources of revenue. He sent a letter expressing his concerns to Governor Snyder.